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  • Writer's pictureDavid James Connolly

Judge slams law firm for class action it should’ve known would fail

The Federal Court has slashed $2.5 million off the fees class action law firm Levitt Robinson clocked up in its long-running case against Aveo Group, and slammed some of its conduct as “seriously derelict” and “beggaring belief”.

Justice Bernard Murphy’s broadside at the firm comes amid heightened scrutiny by judges and politicians of potentially spurious class actions, as litigation funders and competing plaintiff law firms expand the scope of potential cases.

The court’s decision means plaintiffs in the case against Australia’s largest retirement village operator will receive about 17 per cent, or $1.9 million, of the $11 million settlement reached in March, instead of lawyers’ fees eating up the entire payment.

Levitt Robinson had claimed residents lost out to fee gouging by the retirement village giant by between $160 million and $500 million. It alleged residents received less from the sale of their units as leasehold property when they left an Aveo village, and that Aveo failed to disclose that to them.

But documents filed with the court in the days before the trial – which was more than five years after the case kicked off – suggested no loss had been suffered and an $11 million settlement was quickly hashed out.

Justice Murphy ruled last week that this settlement could have been reached much earlier had Levitt Robinson done its job with the efficiency and care it was legally required to apply.

Levitt Robinson took more than five years to get an expert property valuer’s report into loss suffered by the plaintiffs, until just two months before the trial was due to start. This meant Aveo’s own valuations were not filed until right before the trial.

They might think that a settlement under which the only winners are the lawyers indicates that something is terribly amiss in the operation of the class action regime.

A contradictor – an independent expert appointed by the court who runs a ruler over settlements and costs in litigation – found that the case would have orobably settled when the valuation was received, as it showed there had not been significant losses.

Levitt Robinson already had a contradictor appointed against it in a 7-Eleven class action in 2022, and with the Aveo case became the only firm in Australia to have this happen more than once.

Head partner Stewart Levitt was criticised by the 7-Eleven case’s contradictor as giving responses that were “objectively false” and was “evasive” as a witness. They said the firm’s billing practices were “troubling”.

Justice Murphy wiped the significant fees accrued by Levitt Robinson to prepare for trial after that date from the plaintiffs’ legal bill, saying the firm was “seriously derelict” and “neither competent nor efficient” for running the case for so long without any loss valuations.

“It beggars belief that Levitt Robinson would have run up such huge costs ... when it did not have a proper basis for understanding whether it could establish loss,” Justice Murphy wrote.

“This large and complex case consumed substantial resources of the parties, and substantial judicial and administrative resources, when the applicant’s lawyers could not have known whether [their] claims were worth the candle.”

No excuses

The firm appeared not to have sought even a “quick and dirty expert’s report” to informally gauge whether there was loss before pushing on with the case, he said.

The judge also said there was “a lacuna in the evidence” Levitt Robinson submitted to justify its conduct, and that he was not prepared to give the firm “the benefit of any doubt” as to whether the case would have settled earlier were it not for the delays.

It “sits poorly” for the firm to try to convince the court that it could not prove what would have happened had its lawyers met their professional obligations, he said.

The law firm clocked up $11 million in fees running the case, then estimated it would need another $251,000 for organising the settlement approval.

Mr Levitt told The Australian Financial Review  on Friday that the delays in getting the expert valuer’s reports were due to a lack of access to retirement villages during the COVID-19 lockdowns. He said that “all but one of virtually every eligible” valuer on the east coast had said they had a conflict of interest with valuing Aveo assets or thought doing so would risk their businesses because of the company’s market dominance. He also claimed there were “protracted delays” in Aveo giving information to Levitt Robinson.

While the plaintiffs would still only receive 17 per cent of the total settlement after the court reduced the lawyers’ costs, Justice Murphy said “the unfortunate reality is that their case was weak and always likely to fail”.

“They might think that a settlement under which the only winners are the lawyers indicates that something is terribly amiss in the operation of the class action regime,” he said.

“[But] every day, in courts around the country, litigants are forced to confront the reality that their claims or defences are not as strong as they thought. That is what happened here.”

Levitt Robinson was ordered to pay the costs of appointing the contradictor. Justice Murphy also ruled the slashed fees would not include the $7.69 million in costs that litigation funder Galactic paid to the law firm. Galactic already waived the 35 per cent funding commission the plaintiffs had agreed to and all its own costs bar those paid to Levitt Robinson.

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